GB POUND
The pound started the week on the front foot, trading at 1.1993 against the Euro, and 1.2697 against the US Dollar. The strength of the pound can be attributed to the raft of positive economic data coming out of the UK, and also the Italian constitutional referendum on Sunday.
On Tuesday the Financial Conduct Authority (FCA) said it plans to impose stricter rules on financial spread betting products, also known as (CFD’s) contracts for difference. CFD’s allow customers to make huge profits if they predict a correct mark move, conversely they can also lose huge sums if they get it wrong, the FCA’s new rules will prevent inexperienced clients from getting burned by restricting how much leverage they can take.
This will be seen as good news for consumers as its estimated that around 82% of CFD traders lose money, however the news wiped off £1.3bn from the value of spread betting firms in the space of a few minutes.
EURO
EU leaders woke up to a large headache on Monday morning as over the weekend Italian PM Matteo Renzi resigned after suffering a heavy defeat in a referendum, as he tried to reform the Italian constitution.
This could have serious implications for the future of the EU as most of the candidates that could replace Renzi are known to be EU sceptics. Italy is the eurozones third largest economy so the outcome of the referendum could lead to political turmoil, a possible banking crisis and could also mean Italy follows the UK and votes to leave the EU.
US DOLLAR
The dollar started the week trading at a two-month low against the pound, it strengthened throughout the week due to some positive economic data.
New manufactured goods came in above expectations, and non-farm business sector productivity also came in ahead of expectations.
Elsewhere
The Reserve Bank of Australia voted to keep interest rates at the record low of 1.5% on Monday, this was expected but it still caused the AUD to lose ground against most of the majors.
Venezuela has taken the step of issuing higher denomination bank notes to help deal with hyperinflation. A backpack is usually required to carry the cash used to pay for bills in supermarkets and restaurants. The central bank is issuing six new bills ranging from 500 to 20,000 bolivars, currently the largest note in circulation is 100 bolivars.
